2008 crop expenses hit record levels

Brad Haire University of Georgia | Jan 21, 2009

As row-crop harvest was winding down in Georgia, farmers didn't know exactly how much corn, cotton, peanuts and soybeans they had grown. But one thing is almost certain: This past year's row crops were the most expensive in history to produce.

“Georgia farmers, like many, have enjoyed good yields and prices for a few years now. But they've had to deal with rising costs, too,” says Don Shurley, an economist with University of Georgia Cooperative Extension. “The bigger problem is (crop) prices are falling now.”

In 2007, Georgia farmers spent $478, on average, to grow an acre of cotton on irrigated land, Shurley says. This past year, they spent an estimated $573 per acre, the most ever, according to UGA College of Agricultural and Environmental Sciences data.

The per-acre figure includes a farmer's variable costs, which are things like fuel, seed, fertilizers, chemicals, labor, monitoring, harvesting and utilities. It doesn't include what are called fixed costs, or things like equipment depreciation and payments, insurance or land rent that can also be associated with growing crops. It doesn't include the salary the farmer pays himself, either.

In 2007, Georgia cotton farmers picked an average of 801 pounds of cotton per acre. After subtracting the variable costs, they made $63 per acre. In 2008, they averaged 843 pounds per acre. After subtracting their variable costs this past year, they made only $19 per acre.

“These are all average numbers. Some farmers did better. Some did worse,” Shurley says. “But this just goes to show that even with good yields it hasn't been enough to keep up with costs.”

The situation is the same for corn, peanuts and soybeans, says Nathan Smith, a UGA Extension economist.

An acre of irrigated peanuts cost a farmer $529 in 2007. It cost $685 this past year, a 30 percent increase. An acre of irrigated soybeans cost $225 in 2007. It cost $314 in 2008, a 40 percent increase. An acre of irrigated corn this past year cost $648, almost 50 percent more than in 2007. All are record-setting numbers, he says.

The rising prices are cutting farmers' returns on their investments.

The average return on an acre of peanuts in 2007, after subtracting the variable costs, was $233. It was $178 this past year. The average return on an acre of soybeans in 2007 was $105 after variable costs. It will be $24 this past year. The average return on an acre of corn in 2007 was $148. It was $98 this past year. Again, these numbers don't include costs for equipment depreciation or payments, insurance, land rent or the farmer's salary.

“What these numbers do show is that farming has always been volatile in that the farmer has little control over input prices or the prices he receives,” Smith says. “That volatility is even more so now.”

The prices for fuel and fertilizer have stabilized, or decreased, in recent weeks, Shurley says. “But to me, 2009 will be tighter than 2008. Farmers will have some tough decisions to make for this year's crops.”